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Barron’s: Chinese Market Expected to Fall 15 Percent

Newsmax article by Dan Weil

chinaThe Shanghai Composite Stock Index has plunged 38 percent since June 12, and the rout isn’t over yet, experts say.

Top strategists and money managers expect the drop to continue to about 2,700 for the index, according to Barron’s. That’s down 15.8 percent from Monday’s close of 3,206.

Price-earnings ratios don’t look pretty for Chinese stocks, notes Barron’s writer Daniel Shane. The Shanghai index carries a P-E of 15. While that represents a steep decline from June’s high of about 22, it’s 50 percent higher than a year ago, when it totaled 10.

The 2,700 level for the Shanghai Composite would represent a return to 10 for the P-E ratio.

Some say the index could well drop further than that level. “I’m sure there were plenty of analysts a week ago telling you the floor was 3,500,” Michael Parker, a Sanford Bernstein strategist, told Barron’s.

Fundamentals aren’t so hot for Chinese stocks, with economic growth slumping. Official figures put growth at 7 percent, conveniently matching the government’s target. But private economists peg growth at just 3 to 5 percent.

The government devalued the yuan two weeks ago, pushing it down 3 percent, and has significantly eased monetary policy to prevent an economic downturn.

Parker says that for China stocks to bottom, there needs to be evidence of more effective policy making from Beijing than we’ve currently seen. “The risk is they’ll do something draconian on the currency side,” Parker says.

All that raises a major trust issue for China’s government.

“Views about China’s economic prospects appear to be shifting from serious concern to near panic,” Eswar Prasad, a Cornell University economist who formerly headed the IMF’s China division, told The Wall Street Journal.

Some U.S. commentators sounded a note of panic earlier this year about the potential for China’s economy to exceed the United States in size. But now things look a little different.

“The world is starting to realize China is not nearly as competent as thought, especially in the economic sphere where everyone gave it good grades,” Fraser Howie, co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise,” told The Journal.


Posted by:  Steven Maimes, The Trust Advisor


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Special Purpose Trusts For Parents With Troubled Adult Children

NYT article by Paul Sullivan

moneySpecial-purpose trusts can be used to provide children a semblance of the life they might have enjoyed without mental illness or addiction, but these trusts can be complicated to establish.

It was the summer between her sophomore and junior year at the University of Wisconsin-Madison when Patti Sacher’s daughter Keisha had a breakdown. She had taken LSD at a Grateful Dead concert one weekend in 1989. When Mrs. Sacher called to check on her that Monday, Keisha wasn’t making sense.

“She was hearing voices after the weekend, and her thoughts were disjointed,” Mrs. Sacher said of her daughter, who was then 19. “We couldn’t understand what she was talking about.”

Keisha became more involved with drugs during the fall. By January, her parents were receiving alarming phone calls from their daughter’s friends. Keisha ended up being hospitalized that winter, but she wouldn’t come home. She was an adult, and her parents had no legal power over her. After a year, she acquiesced and returned to Great Neck, N.Y., a suburb of New York City.

“The following 15 years were really a nightmare of homelessness, drug use, heroin, running away from residential treatment and eight forced hospitalizations,” Mrs. Sacher said of her daughter’s life. “She was raped and beaten on the streets of the Lower East Side when she was homeless.”

While trying to keep her safe and get her care, her parents were struggling with the financial aspects of her illness. But their concerns went beyond what insurance would cover into how they would pay for what insurance did not — including Keisha’s food and apartment, and the cat that gave her something else to focus on.

As time went on, Mrs. Sacher, now 69, and her husband worried about who would care for their daughter, now 44, after they died. Finding someone to replace them would be tough, but also how would they pay for her care?

There are many painful, emotional issues surrounding crises like mental illness and addiction that affect children. But there are concrete financial steps parents can take that won’t worsen their child’s condition, enable their child’s addiction or, in the case of mental illness, run afoul of limitations on the number of assets a person can have and still qualify for government benefits.

One starting point is a special-purpose trust, which can provide care for the suffering child and peace of mind for the parent.

Karen Francois, the chief personal trust officer at Evercore Trust Company, says these trusts are different from special-needs trusts, which are often used to pay for the extra things needed by those who are receiving government benefits — the government has strict restrictions on a person’s assets. Special-purpose trusts can be used to provide children a semblance of the life they might have enjoyed without mental illness or addiction.

“You might be working with a situation where, with an addictive individual, you could have some good years and some bad years,” Ms. Francois said. “You want that latitude to make changes with the distributions.”

People can also use these trusts to shield siblings from feeling bound to care for a troubled sister or brother. Most of the trusts Ms. Francois’s firm works with, she said, are worth more than $5 million. Below that, the costs to administer them are too high for the firm.

Beyond the large sum of money needed to establish a professionally managed trust, which in itself excludes many families, special-purpose trusts are more complicated to establish than regular trusts because of the powers they give to trustees and the restrictions they place on distributions. But advisers say the hardest part about setting up these trusts can be getting parents to accept them as necessary. Doing that means parents have to acknowledge that their children are never going to fully recover.

“It requires the parents and often the grandparents to recognize there’s an issue out there,” said Robert M. Freedman, a partner at the law firm Schiff Hardin who has worked on many such trusts. “The recognition of the issue is a lot tougher with this group than with someone who is developmentally disabled, like with autism. You see it at birth and plan accordingly.”

He said most people came to him after their children had dropped out of school in their late teens or 20s. He attributes the hesitancy to the stigma around some forms of mental illness like schizophrenia and around addiction to drugs like heroin.

“It’s easier to say my son isn’t graduating from medical school, he’s just coming home for a while,” Mr. Freedman said.

But if parents do that, Mr. Freedman said, the estate plan they put in place for all of their children could actually harm the troubled child who would then have the same access to funds as the other siblings.

Parents who get past the stigma need to work with their lawyers and estate planners on some technical and structural problems to ensure these trusts work properly.

One problem is trying to picture the child’s future — with children suffering from schizophrenia or drug addiction, it’s very difficult to make a prediction. Periods of lucidity can end suddenly with a breakdown.

“They need to ensure there is flexibility in any plan,” said Jeffrey C. Wolken, head of wealth and financial planning at Wilmington Trust. “You don’t necessarily know what you’ll need in the future based on today.”

He advises clients to have distribution advisers for their trusts. While corporate trustees or family members can oversee the general administration of the trust, a distribution adviser like a social worker with specialized training can assess the child’s general well-being.

“The key to making this all work is proximity to the person,” Mr. Wolken said. “That’s tough for a corporate trustee. Even if you’re close, you don’t have enough time to spend with that person to make a perfect judgment.”

Lori I. Wolf, a partner at the law firm Cole Schotz, says she encourages clients to write very specific criteria for distributions into trust documents — like staying on medication or being sober for a certain amount of time. If those markers are met, the child could become a co-trustee of the trust, she said.

Still, she discourages parents from ever including a clause that says after so many years, the money passes directly to the child with problems, the way it might to siblings.

“People say if they have three or five or seven years clean, why don’t we end the trust? I say because they can have a relapse,” Ms. Wolf said. “Some of these struggles can be lifetime struggles. Why set up a situation where the money is in their hands and you can’t get it back?”

In fact, she says that she advises all clients, particularly ones with a family history of mental illness and addiction issues, to get a power of attorney and health care proxy for children over 18 who are away at college. That way if something happens to their child, the parents will have access to medical records and will be able step in to help.

For the longer term, if the original trustees are no longer involved, Mr. Freedman says he encourages people to write a nonbinding letter of intent with the purposes of telling future administrators of the trust about the child’s history and setting general guidelines.

Still, even the best planning “can go really badly, but it’s not necessarily your mistake,” he said. “Mental illness is there for life. If you stay on your medication, it’s better. But there are times when the medication doesn’t work and people have acute illness.”

He added, “Addiction can be powerful. No matter what you do to try to help the person, you can’t buy illegal drugs legally. If you’re doing drugs, you’re running risks of criminal stuff.”

Mrs. Sacher, who volunteers for various support groups including the National Alliance on Mental Illness, says parents will struggle to come to terms with the severity and permanence of their child’s suffering, as she once did. But accepting the situation and acting to make it adequate as quickly as possible is the best outcome.

“Each person has to come to the acceptance at their own rate on their own time,” she said. “There are things that you cannot change, that you cannot help. We cannot solve all the problems. But we don’t give up hope that she can have a better life than she has.”


Posted by:  Steven Maimes, The Trust Advisor


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Money Managers Look for Stock Bargains in Turmoil

NYT article by James B. Stewart

moneyThe steep market sell-off has spared hardly anyone. Even some of the country’s top-performing portfolio managers have been hit. A fund run by William Miller, the Legg Mason Opportunity Trust, gave back all of this year’s gains of 14 percent. Bill Smead, who manages the Smead Value Fund, lost about 10 percent over the last month. Both funds are now roughly flat over the last year.

Yet the severe plunge in the world’s major stock markets — coming as it has four years since the last (brief) correction here in the United States and more than six years since the end of the last bear market — was something of a relief to the two seasoned mutual fund investors.

“When you’ve been in this business for 35 years, as I have, you prefer a fast death to a slow death,” Mr. Smead said when I reached him in the midst of this week’s turmoil. “We’re not technical people, but for this bull market to have another leg, you have to have something like this happen.”

That’s because sustained market rallies come not during periods of complacency and optimism, but when most investors have given up and thrown in the towel (think of March 2009). “It had been a long while since we’ve seen anything that looks like this sort of capitulation,” Mr. Smead said.

Mr. Miller said he met with his team on Monday after two days of unabated selling, and told them: “What happened today and Friday is that the froth is being blown off the beer. The beer is better without the froth.”

There’s no way to know where markets are headed next, of course. By some measures, United States stocks are still expensive relative to expected earnings.

The AlphaSimplex Group in Cambridge, Mass., which follows a strictly quantitative, computer-driven approach, significantly lowered its exposure to United States stocks on Wednesday. “That’s in response to the above-average risk we’ve seen in the market, not just in the past few days, but building up over recent weeks and months, which includes the risk of contagion from abroad,” said Alexander D. Healey, director of strategic research at AlphaSimplex.

But one thing is certain: Stock prices are much lower today than they were a few weeks ago, with every major index, both in the United States and overseas, down more than 10 percent, which is the definition of a correction. (A decline of 20 percent or more is considered to indicate a bear market.)

Both Mr. Miller and Mr. Smead told me they saw what looked like significant bargains emerge from the sharp drop, and they were using the opportunity to add to positions in their favorite stocks.

While Mr. Miller’s fund gave back all of this year’s gains, it still ranks near the top of its category, which is midcap value funds, and ranks first over three years, with an annualized return of nearly 29 percent, according to Morningstar. He was one of the experts I interviewed last year for my annual outlook column, and his prediction of “a lot more volatility than we’ve become used to” has been borne out this week.

Mr. Miller told me he was struck that this week’s selling was across the board, affecting virtually all regions and sectors. “The selling was indiscriminate,” he said. “But everyone’s prospects have not changed identically and for the worse. That means there are opportunities.”

So what was Mr. Miller buying this week? He said he was pursuing his themes of home builders (“completely unaffected by China”), airlines (“screamingly cheap, especially with low oil prices”) and money center banks (“generating huge amounts of capital”). He also said he was intrigued by Twitter, which was trading below its initial public offering price this week.

Mr. Smead’s Smead Value Fund (investor class) ranks first among large cap blended funds over five years, with a five-year annualized return of just under 19 percent, according to Morningstar.

“We’re value investors,” Mr. Smead said, “and we have eight strict criteria for picking stocks,” one of which is “a low price in relation to intrinsic value.” (The other criteria are listed on Smead’s website.) “After four days of this correction, our portfolio is trading at 13.8 times forward earnings. That’s way better than 18.”

He continued: “We try to take a long-term view. There are 86 million people in this country between the ages of 19 and 37. They don’t own stocks, they do drive cars, and they want to buy a house. This is nirvana for them” — because they haven’t lost any money in the market, gas prices are plunging and mortgage rates are likely to remain low — “and great for the United States economy.”

Mr. Smead said he was buying four stocks, which he considered solid value propositions: Amgen, Berkshire Hathaway, American Express and News Corporation.

If opportunities are appearing in the United States market, they are even more evident overseas, even in China, whose faltering economy and currency, and plunging markets, have been the trigger for the recent global market turmoil.

In part that is because many emerging markets were already in a bear market before the recent plunge.

“Emerging markets are generally looking attractive relative to their historic valuations,” said James Syme, a senior fund manager at J. O. Hambro Asset Management in London, although he added that there was a big difference between manufacturing exporters like China, Taiwan and South Korea, whose stocks “seem incredibly cheap,” and countries that rely heavily on commodity exports, like Brazil and Russia.

J. O. Hambro’s International Select Fund ranks first over both three- and five-year periods in its category, which is foreign large cap growth funds, according to Morningstar, with annualized returns of 14 percent over three years. The fund is closed to new investors, but Mr. Syme manages J. O. Hambro’s Global Emerging Markets Opportunities Fund, which isn’t. Over the last year, it is down roughly 20 percent, which nonetheless puts it near the top of its category, which is diversified emerging markets.

“We’re overweight in China, and we’re using periods of weakness to top up positions,” Mr. Syme said. “There are obviously stresses in the Chinese economy, but Chinese policy makers have plenty of tools to address those challenges. Interest rate cuts and currency weakness are two of those tools, and we expect to see results from their recent actions during the second half of the year.”

Moreover, he added, “Chinese stock valuations are pricing in an awful lot of bad news.” He noted that the current forward price-earnings multiple on Hong Kong-listed Chinese stocks is nine, “which is about where it was after the collapse of Lehman.” At the same time, his fund is avoiding “the commodity exporting nations.”

“We’re very underweight Latin America, Indonesia and Malaysia, and have only a few select positions in Russia and South Africa,” Mr. Syme said.

Besides adding to positions in Hong Kong-listed Chinese shares, Mr. Syme said he was buying leading Asian technology companies, such as Samsung and Taiwan Semiconductor.

With the markets soaring on Wednesday and grinding higher in Thursday trading, purchases made earlier in the week look smart, for now.

If the volatility continues and the indexes drop further, investors should remember what Mr. Miller says is a rather simple math lesson.

“Lower prices now mean higher long-term rates of return,” he said, citing the example of John Maynard Keynes, who resisted pressure from the trustees of King’s College at Cambridge, whose investment portfolio Mr. Keynes managed, to sell stocks during the Great Depression.

“If you sell when stocks go down, you’ll end up owning nothing when they hit bottom,” Mr. Miller said. “You should be doing the opposite.”


Posted by:  Steven Maimes, The Trust Advisor


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Women May be less Prepared for the Death of their Spouse

MarketWatch article by Quentin Fottrell

spouseEven if you have above-average wealth, like Facebook Chief Operating Officer Sheryl Sandberg, who lost her husband suddenly earlier this year, it’s important for couples to make sure the surviving spouse is taken care of.

Women outlive men, but they may not fare so well financially after the death of their spouse.

Nearly half of women (49%) say their ability to make mortgage payments, save for college tuition and pay bills would be adversely affected by the death of their spouse, compared to just 37% of men, according to a new survey by personal finance site NerdWallet. Women are also less likely to know the terms of their spouse’s life insurance policy (57% versus 69% of men) and less likely to find family financial documents in an emergency (32% versus 21% of men), the study of 2,000 married adults found.

The average life expectancy of Americans is at historic highs with women outliving men on average by nearly five years (81.2 years versus 76.4 years for men), according to the latest data from the Centers for Disease Control and Prevention. “Couples appear ill-prepared to face this reality with sufficient life insurance coverage,” says John Kuo, senior strategy analyst at NerdWallet. “This is an area where the longevity gap, which favors women, collides with the pay gap, where men earn more.”

Most Americans who have life insurance know some of the basics of their policies — the name of their insurance company, names of beneficiaries and where records are kept. But only 63% know the terms of their spouse’s policy, such as the length and amount payable. What’s more, about 1 in 4 couples have no life insurance at all, the survey found. “Couples need to plan and talk more about end-of-life financial preparation and final wishes,” Kuo says. “It’s not a pleasant conversation, but it’s a vital one.”

And those who do carry life insurance often don’t have enough, a separate study by personal finance site found last month. Nearly half (47%) of insured respondents in a survey of 1,000 adults carry coverage of $100,000 or less and, of them, more than 1 in 5 have a benefit amount of $25,000 or less. Only 2% of those surveyed had $1 million or more in life insurance. Nearly half of all adults — married or single — have insufficient coverage to address the financial needs of their families, it found.


Posted by:  Steven Maimes, The Trust Advisor

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FolioDynamix and INFOVISA Partner to Break Down Technology Silos in Bank and Trust Wealth Management

Joint Interface Will Enable Bank and Trust Firms to Seamlessly Share Information Between INFOVISA Trust Accounting System and FolioDynamix Portfolio Management Platform

FolioDynamix, a leading provider of wealth management technology and advisory services, today announced a partnership with INFOVISA, an independent provider of data processing systems for bank trust departments and independent trust companies. The two companies will develop a turnkey interface that will enable trust firms to seamlessly share information across their trust accounting system and portfolio management platform. The partnership will help banks and trust firms break down barriers between their trust, brokerage and investment advisory functions and empower advisors with a more holistic view of their clients’ data.

The joint technology interface will also allow INFOVISA clients to directly access advisory services from FDx Advisors, the registered investment advisor affiliate of FolioDynamix.

“We are excited about the FolioDynamix partnership and look forward to making it easier for INFOVISA clients to access next-generation rebalancing, performance measurement and proposal generation technology, as well as advisory services, all integrated with the INFOVISA trust accounting system,” said Mike Dinges, president and CEO of INFOVISA.

“Our partnership with INFOVISA has the power to be a game changer for banks looking to grow their wealth management business and better align their trust and retail channels,” said Bob Mehringer, executive vice president of advisory solutions at FolioDynamix. “Bank trust firms have historically been held back by technology silos that prevent advisors from gaining a holistic view of a client household, and FolioDynamix and INFOVISA are working to remove at least one of those barriers with this partnership.”

About FolioDynamix

FolioDynamix offers the most comprehensive web-based wealth management technology platform for managing the full advisory lifecycle – proposal generation, research, model management, portfolio accounting, trade order management, reporting, and performance analytics. Unlike other wealth management platforms, the FolioDynamix platform is truly unified to eliminate silos and empower advisors with a single platform to manage all customer accounts. FolioDynamix provides registered investment advisors, banks, broker dealers, custodians and wealth service providers with leading-edge technology to attract and retain advisors, accelerate client acquisition and gain visibility across all assets under management. The results are improved efficiency, stronger compliance, enhanced client service and faster growth. Visit

About INFOVISA                                                                                        

INFOVISA is an independent provider of data processing systems and related services for bank trust departments, independent trust companies, not-for-profit foundations, colleges and universities. INFOVISA was founded in 1992 and has long been a pioneer in the wealth management arena. MAUI™ is comprised of individual modules providing the user with a customized system to meet their needs. Through a combination of proprietary software coupled with Application Service Provider (ASP) services, clients of INFOVISA are provided with a robust and comprehensive technology solution. Never before has the wealth management industry had such leading edge technology at their fingertips. For more information, visit us on the web at


Posted by:  Steven Maimes, The Trust Advisor


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Salesforce Introduces Salesforce Financial Services Cloud: Transforming the Client-Advisor Relationship

salesfSalesforce [NYSE: CRM], the Customer Success Platform and world’s #1 CRM company, today introduced Salesforce Financial Services Cloud, transforming the client-advisor relationship for the digital age.

With Salesforce Financial Services Cloud, the company’s first industry-specific product, Salesforce is empowering advisors to build deeper, 1-to-1 client relationships, be more productive, and engage more holistically with clients anywhere and on any device. Leveraging the new Salesforce Lightning Experience, an entirely new user experience that also launched today, Salesforce Financial Services Cloud is modern, intuitive and intelligent, bringing new levels of efficiency to advisors.

In the next five years, more than $2 trillion in wealth is expected to transfer between generations. Today’s financial advisors need to meet the needs of clients set to inherit this wealth, and who are increasingly social, mobile, connected and seeking significantly more collaboration. In fact, 55% of investors want the opportunity to collaborate with their advisors, yet very few are able to do so today. To succeed, advisors must free up time from administrative tasks and build deeper relationships with clients and their families.

Introducing Salesforce Financial Services Cloud

The new Salesforce Financial Services Cloud is transforming the client-advisor relationship by delivering more personalized client experiences, increasing agent productivity and enabling collaboration like never before.

Build Deeper, 1-to-1 Client Relationships: The Client Profile in Salesforce Financial Services Cloud allows advisors to see all of their clients’ information in one place, with instant access to tear-sheets, financial accounts and goals. In addition, as wealth is transferred between generations, advisors need to gain a more complete picture of everyone in the family. The Client Profile’s Relationship component enables advisors to visualize and manage relationships with extended family members. Advisors can now map and build 1-to-1 relationships with each member of their clients’ households, using relevant information to manage their individual goals, such as budgeting for college, buying a new home or planning a summer vacation.

Increase Productivity: A frequent complaint among financial advisors is that they spend half their day on manual and paper-based tasks to prepare for meetings. Salesforce Financial Services Cloud’s Advisor Today homepage is built to enhance advisor productivity by automating administrative tasks and giving advisors more time to focus on their entire book of business. They can check information on client accounts, such as gains and losses, and review relevant market insights. And rather than toggling between systems, advisors can stay on top of their most critical tasks throughout the day with the Salesforce Financial Services Cloud Assistant. It aggregates information from multiple systems and creates comprehensive advisor to-do lists, including proactive alerts for leads and tasks.

Engage with Clients Everywhere: With Salesforce Financial Services Cloud Private Client Communities, advisors can easily collaborate with clients and other stakeholders within the client’s household. In addition, an entire advisory team, including third parties, can come together to provide clients with collaborative advice. And because advisors can access the Salesforce Financial Services Cloud app from any device, they can give ongoing advice in micro-moments to their clients. They no longer have to schedule quarterly meetings to connect with customers — they can quickly and easily share information, proactively respond to questions and more, all while in a cab or waiting in the coffee line.

Comments on the News

“Today’s investors want a much different relationship with their advisors than their parents had,” said Simon Mulcahy, SVP and GM of Financial Services, Salesforce. “They want someone who understands them and engages them on their terms. Salesforce Financial Services Cloud sets advisors free from administrative tasks and gives them the modern tools they need to supercharge their relationships.”

“A client’s financial well-being isn’t just about money. It’s about a person’s entire life,” said Mike Capelle, chief strategy officer, United Capital. “With Salesforce Financial Services Cloud, advisors now have the technology to build deeper, 1-to-1 relationships with their clients, helping them make the right financial decisions to achieve their life goals.”

“Today’s connected clients expect their advisors to have a deep and holistic understanding of their unique financial needs,” said Anil Arora, CEO of Yodlee. “By integrating the Yodlee Aggregation Platform with Salesforce Financial Services Cloud, we are enabling them with aggregated, user-permissioned account data and a 360-degree view of their client’s finances so they can provide the very best in customer advice.”

“We are excited about the release of Salesforce Financial Services Cloud and what it means to the wealth management industry,” said Michael Spellacy, Principal, Global Wealth Leader at PwC. “We believe this product can fundamentally change the way wealth managers engage with their clients by providing a complete customer eco-system perspective. It transforms the experience of the wealth manager and gives them a more integrated perspective on their client interactions.”

The Salesforce Financial Services Cloud Ecosystem

Salesforce has built an entire ecosystem around the Salesforce Financial Services Cloud to accelerate customer success and ensure the product meets the unique challenges faced by today’s advisors. This includes working with leading wealth management firms in the design of the product, including Northern Trust and United Capital. In addition, Salesforce systems integrators Accenture, Deloitte Digital, PwC and Silverline support Salesforce Financial Services Cloud by providing technical integration assistance with leading wealth management firms. And Salesforce independent software vendors, including Advisor Software, Informatica and Yodlee, extend the functionality to the product, with sophisticated tools:

The Portfolio Rebalancing App from Advisor Software is an enterprise-grade rebalancing engine that can quickly scale to thousands of advisors. Integrated into the Salesforce Financial Services Cloud, rebalancing may be done either automatically or manually, with the option to pass trade files for manual review or directly into an order management system (OMS). The rules-based aspect of the application allows advisors to set constraints, receive alerts and rebalance accounts at both the household and individual account level.

The Cloud Integration Portfolio from Informatica connects Salesforce Financial Services Cloud with core back-end systems, such as asset management, portfolio management, risk and trust operations, to aggregate critical investment data in the cloud. Informatica, a global provider of data integration software, integrates data from hundreds of on-premises systems, SaaS applications and enterprise databases.

The Account Aggregation Platform from Yodlee collects and connects end-user account data from more than 14,000 sources (such as bank accounts and 401ks) to provide wealth management professionals with a holistic view of their client’s finances across accounts. This empowers advisors to deliver smarter, more personalized engagements that lead to increased assets under management and improve regulatory compliance.

Salesforce Financial Services Cloud previews today, with general availability slated for February 2016.

Learn more about Salesforce Financial Services Cloud at


Posted by:  Steven Maimes, The Trust Advisor

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Why China’s Stock Market Crash is so Bad for Apple

Vox Technology article by Matthew Yglesias

chinaappleChina’s stock market has been crashing this summer, which is both a sign of and potentially a cause of underlying economic problems in the country. Those problems have also led to a reduction in the value of China’s currency. This instability has roiled global financial markets more generally, but Apple — America’s largest company — has been hit especially hard, losing 18 percent of its value over the past six months and wiping out many tens of billions of dollars of paper wealth.

The situation got so bad that Apple CEO Tim Cook recently took the extraordinary step of emailing CNBC anchor Jim Cramer to try to intervene in the stock slide, assuring investors that “growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.” The reassurance did at least some good in halting the slide, though Apple shares are still far from making up their losses.

Apple has an unusually heavy exposure to problems in the Chinese economy for reasons that aren’t addressed by Cook’s letter.

Apple sells iPhones for yuan but pays suppliers with dollars

The basic issue is that Apple doesn’t like to change its retail prices in response to currency fluctuations. So when a foreign currency declines in value relative to the dollar, the number of dollars Apple earns per sale goes down. Conversely, foreign currency appreciation means Apple is earning more dollars.

Last quarter, 27 percent of all Apple’s revenue came from Greater China. More importantly, more than 50 percent of Apple’s revenue growth came from China.

Even if Apple’s sales — in terms of number of units — hold up, the value of those sales is going to decline at a time when the company was counting on rapid growth to help offset the essentially inevitable slowdown of iPhone sales in the already highly saturated US market.

Apple rather famously relies on Chinese suppliers and assembly facilities, so you might think a falling yuan would saving Apple money. But most of Apple’s key contracts with suppliers like Foxconn and Lenovo are denominated in dollars, meaning the suppliers themselves may see a benefit from lower costs but Apple will not.

So Apple is paying Chinese companies dollars to assemble phones that are then sold to Chinese consumers for yuan. When the value of the yuan goes down relative to the dollar, that’s not going to be good for Apple’s profits.

Apple has a limited strategy to mitigate its currency risk

Oftentimes large companies that are exposed to different kinds of currency risk will try to hedge that risk by buying derivatives. For example, if a more expensive Japanese yen is good for Apple’s profitability but a cheaper yen is bad, a company might offset that by placing a speculative bet that the yen will decline in value. That way, any yen-specific changes will be offset, and the success of Apple’s Japan operation will be driven by how much Japanese people like iPhones.

The problem is that China’s tightly regulated financial markets make hedging difficult and at times expensive.

This seems to be one of the reasons Apple is borrowing a huge number of Australian dollars. Australia exports enormous quantities of raw material to China, so bad economic news from China tends to lead to a declining price of Australian dollars. So-called kangaroo bonds are thus a kind of back-door hedge against Chinese currency risk. But even the best hedging strategy can’t bring back the kind of staggering growth opportunity that led to Apple’s China revenue more than doubling over the past year.

Most US companies don’t have these problems

You’ve probably heard a lot about trade with China over the years, but it’s important to understand that Apple is fairly unusual in terms of relying heavily on Chinese customers. The United States as a whole sells way more stuff to Canada and Mexico than to China and lots of prominent technology companies in particular — Google, Facebook, Twitter — barely even exist in China due to censorship.

But America does buy lots of stuff that is made in China, and while Apple’s supplier contracts are structured in a way that doesn’t let them take advantage of lower production costs, that’s not true for every company. Apple isn’t alone in the China boat — airplane manufacturer Boeing is also exposed to the Chinese economy, though its sales are priced in dollars — but it’s not a very crowded ship.


Posted by:  Steven Maimes, The Trust Advisor



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5 Things You Need to Know About This Stock Market Sell-Off

MarketWatch article by Charles Passy

chinaRemember those peaceful, early days of 2015? When Donald Trump wasn’t running for president (at least, not officially)? When Tom Brady wasn’t fighting his Deflategate suspension? Oh, and when the Dow Jones Industrial Average DJIA, wasn’t on a topsy-turvy ride reminiscent — at least to some investors — of the dark days of 2008-09? Well, those days have clearly passed.

And while we can’t make sense of all the things in our world — like, say, Trump’s obsession with Megyn Kelly — we can try to put the stock market’s roller-coaster ride of late into perspective, especially for nervous investors who may have not been paying close attention to the financial world until just a few days ago. The situation can best be framed in a series of questions — five questions, to be exact. Hopefully, the answers, which come courtesy a wide range of financial professionals, will help guide investors through the rest of 2015.

Is this a repeat of 2008-09?

The Dow has taken quite a tumble, but the 10%-15% correction of the last few days is still nowhere close to the 53% nosedive the Dow took from October 2007 to March 2009. And most financial professionals doubt the current dip will go that far. The big difference between then and now? The lack of a major economic event — like the burst of the housing bubble — to upend the market. As Mark Luschini, chief investment strategist of Janney Montgomery Scott, says, that bubble “cratered the balance sheets of financial institutions to the point of bankruptcy” and “the ensuing loss of trust and lack of credit checked business activity and drained market confidence.” By contrast, there’s nothing of that magnitude affecting the U.S. economy — or the world, for that matter — today. “Markets may remain volatile,” Luschini warns, but he says a 2008-09 scenario is unlikely because many fundamentals — “U.S. banks are in great shape,” he notes — remain strong.

But what about China’s economy?

There’s no doubt that what’s happening in China — namely, the slowing down of a booming economy and the resulting effects on everything from the Chinese market to the Chinese currency — is a matter of concern to U.S. investors, since ours is a global economy. Adding fuel to the fire: it’s often very hard to take China at its word about how its economy is doing. (China says it’s growing at a 7% rate, but some economic experts say the growth is more likely below 4%.) Still, a number of financial professionals don’t seem all that concerned. Part of the reason is because China’s growth couldn’t be sustained forever and it’s only natural that its economy would start to transition from being export-based to consumer-based. The picture isn’t always pretty — “They are trying to engineer a controlled slowdown, which is easier said than done,” says Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute — but the situation isn’t entirely unexpected. But another part is that U.S. investors ultimately prefer to focus on the U.S. economy, so they’re somewhat shielded from events overseas. “Most investors like to open their pantry in the morning and say, ‘I own that stock,’” says Wren.

What about the U.S.?

Here, there’s generally good news, financial professionals say. Unemployment remains relatively low — and has gone downward since the start of the year from 5.7% to 5.3%. (And keep in mind it was as high as 10% in October 2009.) Plus, consumer confidence is surging — it reached a seven-month high in August. Sure, there are concerns about what will happen to the economy if and when the Federal Reserve raises interest rates. And for all the notes of optimism surrounding the jobs picture — Brad Friedlander, managing partner of Angel Oak Capital Advisors, goes so far as to say unemployment is in a “nosedive” — wages haven’t grown significantly. As a recent MarketWatch story noted, annual increases in hourly pay have stuck to a narrow range of 1.9% to 2.2% since 2012. Still, financial professionals generally concur that the positives outweigh the negatives. “Our economy is moving in the right direction,” says Wren of Wells Fargo.

But a 10%-plus correction is no small deal, right?

A 10%-15% correction shouldn’t be ignored, but it’s also a fairly normal occurrence in market cycles, financial professionals are quick to note. Since 1946, there have been 31 instances of a 10% drop. But a 10% drop doesn’t necessarily lead to a 20% one (which denotes a bear market) — in fact, in just 12 of those 31 instances did a bear market eventually ensue. If anything, the reason the current drop seems bigger is that it comes after a 47-month period without a 10% correction — the third longest such span in market history. “So this (drop) feels scarier than it should,” says Joe Duran, chief executive of United Capital, a financial life management firm.

So, should I do anything about my portfolio?

Time and time again, financial professionals warn about the dangers of market timing and deviating from the classic long-term portfolio models. “It’s the selling low, buying high phenomenon we see all the time,” says John Moninger, managing director at Eaton Vance. But that doesn’t mean investors should turn a complete blind eye to their asset allocations. Some professionals say a downturn can be a good time to fine-tune an existing strategy — not so much changing the percentages allocated for stocks or bonds, but the kinds of stocks or bonds within those allocations. On the other hand, if you’re an investor who’s been sitting on huge amounts of cash since 2008-09, now might finally be the time to make a move into equities. “When there’s a pullback, you need to put some money to work,” says Wren of Wells Fargo.


Posted by:  Steven Maimes, The Trust Advisor


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The Sky is Not Falling: Robo-Advisor Says ‘Black Monday’ was Business as Usual

New York Business Journal article by Michael del Castillo

robo graphicWhile many stock markets around the world have suffered big losses, one New York City-based adviser with a different kind of investor experienced very little change.

Global stock markets suffered their toughest day in years after China’s “Black Monday” triggered multiple market sell-offs. But at one New York financial technology startup with a different kind of customer, yesterday was business as usual.

“It’s sort of odd, but if I didn’t know, if I was just looking at customer statistics, I wouldn’t have known that anything was going on,” said Dan Egan, director of behavioral finance and investing at Betterment, a “robo-adviser” targeted mostly at do-it-yourself investors, not those conducting business at traditional firms.

Between Friday, when the New York Stock Exchange dropped 531 points, the lowest its been since last October, to Monday, when it dropped another 588 points, the vast majority of Betterment’s investors didn’t even login to check on their investments.

Specifically, 83 percent of Betterment’s customers hadn’t logged in as of shortly after the closing bell at the New York Stock Exchange on Monday, according to Egan. While the exact numbers on the day’s performance won’t be released until after the company’s data scientists have had a chance to review them, Egan said all the real-time data, including new customers joining was “perfectly normal.”

“The vast majority of normal people are concerned about how do they ask their boss for a raise, or is their kid going to pass his algebra test?” said Egan.

Founded in 2008, Betterment has raised $105 million in venture capital, currently has $2.6 billion assets under management, and as of last month was serving 100,000 customers. The company declined to share the total assets under management as of last Friday, which would have given a better idea of the impact the sell-off has had on its bottom-line.

The stock market sell-off was triggered by concerns over China unexpectedly devaluing is currently last week, according to a Reuters report. The resulting drop in China’s stock is being attributed to a 4.6 percent drop on Tokyo’s Nikkei-225 index, a 4.5 percent drop in Britain’s FTSE 100 index, and a 5.6 percent drop in Paris’s CAC 40, according to a Washington Post report.

While the New York Stock Exchange drop was unusually steep, it could have been worse. The initial drop yesterday was actually more than 1,000 points, but the market recovered later in the day. While Egan acknowledged the sell-off made a dent in the company’s capital, as of yesterday evening, the recovery had mitigated Betterment’s losses. “We are getting pretty close to where we wanted to be anyway,” he said.


Posted by:  Steven Maimes, The Trust Advisor


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U.S. Stocks Jump At Opening Bell After Global Markets Stabilize

U.S. stocks jumped at the open after China’s central bank cut interest rates to support its economy.

The Dow Jones industrial average rose 296 points, or 1.9 percent, to 16,180.61, as of 9:45 a.m. Eastern time. The Standard & Poor’s 500 index climbed 38 points, or 2 percent, to 1,932. The Nasdaq composite rose 109 points, or 2.4 percent, to 4,635.

Oil prices are up, but U.S. crude is still trading below $40 a barrel.

Treasury notes are falling, pushing up the yield on the 10-year benchmark not to 2.08 percent.

Best Buy was the biggest gainer in the S&P 500 index. The stock surged 16.4 percent after its fiscal second-quarter results handily beat analysts’ estimates as shoppers picked up major appliances, large screen televisions and mobile phones


Posted by:  Steven Maimes, The Trust Advisor


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